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YANGON, Jan 28 AFP

January 28 2013, 10:58PM

Myanmar (Burma) has hailed a deal with international lenders to cancel nearly $US6 billion ($A5.8 billion) of its debt.

The former pariah state also cleared its arrears to the World Bank and the Asian Development Bank (ADB) with the help of loans from Japan, removing another key hurdle for the resumption of international aid.

The Paris Club of creditor nations said on Monday it had agreed to write off half of Myanmar's debts to the group, with the remainder to be rescheduled over 15 years.

The club praised Myanmar's "strong commitment" to economic reforms.

According to Myanmar, Japan has committed to cancel arrears worth more than $US3 billion while Norway is writing off $US534 million. It expects other donors to follow suit.

Myanmar Finance Minister Win Shein says the nation will use the resources made available by the debt relief for development and poverty reduction programs.

Japan had already announced plans to cancel some of Myanmar's debt, saying last April it would forgive Y300 billion ($A3.19 billion) of the Y500 billion it was owed.

In another landmark, Myanmar restructured more than $US900 million of debt to the World Bank and the ADB, enabling the two development lenders to resume assistance to the country.

The World Bank pledged new funds for Myanmar of $US440 million while the ADB offered $US512 million. The new credit lines will enable Myanmar to repay the bridge loans provided by the Japan Bank for International Cooperation.

"Myanmar has come a long way in its economic transformation, undertaking unprecedented reforms to improve people's lives, especially the poor and vulnerable," said the World Bank's Myanmar director Annette Dixon.

"Much work remains to be done. We are committed to helping the government accelerate poverty reduction and build shared prosperity," she added.

The World Bank in November pledged $US245 million of aid to support Myanmar's economic development.

The Manila-based ADB said it planned "major investments" in road, energy, irrigation and education projects.

President Thein Sein has overseen dramatic reforms since taking office in 2011, including the release of political prisoners and the election of Nobel Peace Prize winner Aung San Suu Kyi to parliament.

His government has also overhauled the complex exchange rate system and introduced a new foreign investment law.

In response, the West has begun rolling back sanctions and foreign firms are lining up to invest in the country, eyeing its huge natural resources, large population and strategic location between China and India.